PART 2: Relief for Small Businesses
Read Part 1 here.
The House passed the Cares Act previously passed by the Senate Wednesday evening, meaning and the President signed it into law as I began typing this post.
In Part 1 yesterday, we looked at the various portions of the bill that aim to provide relief to individual American citizens. Today, we’ll look briefly at the provisions of the bill designed to help out small businesses.
Employee Retention Credits – Employers who were forced either partially or completely shut down as a result of a coronavirus-related order, or whose gross receipts declined by more than 50% compared to the same quarter of the previous year will be eligible for an employee retention credit (a refundable payroll credit for 50% of wages paid by employees during the crisis). For employers with 100 or fewer full-time employees will receive the credit regardless of whether they had to shut down. The credit covers the first $10,000 of compensation (including health benefits) paid to an employee or incurred from March 13 to the end of the year.
Deferment of Social Security Tax – Employers (& the self-employed) are allowed to defer payment of the employer share of Social Security tax owed to the federal government, but would have to make catch-up payments for any deferment in the following two years.
Removal of Net-Operating Loss (NOL) Limitations – Currently NOLs can’t be carried back past the prior tax year. Under this provision, NOLs from 2018, 2019 and 2020 can now be carried back five years, and the limits on taxable income would be removed so that any NOLs can fully offset income. Companies will be allowed to amend prior years’ returns to (in theory) add liquidity and free up cash. The changes are also available to pass-through businesses & sole-proprietors.
$350 Billion Paycheck Protection Program – This provision authorizes the Small Business Administration to make loans to businesses with 500 or fewer employees, the self-employed, and certain non-profits. Loans will be provided for up to 250% of an employer’s average monthly payroll up to a maximum of $10 million. Loans will be 100% federally guaranteed (no collateral or personal guaranty required). Borrowers would be eligible for loan forgiveness equal to the amount spent by the borrower on payroll costs during the 8 week period after the loan origination date, interest on mortgage payments for pre-existing mortgages, rent payment on pre-existing leases, and utility payments for services already in place. Any loans not forgiven would be carried forward as a loan with a maximum of 10 years and a rate not to exceed 4% interest.
Again, if you have any questions or want to know more about any specific provision, please give us a call at 832-225-3448 or email us at email@example.com.
A detailed breakdown of many of the sections of the Act is available here.